### In the 

# United States Court of Appeals For the Seventh Circuit

____________________

No. 14

- 1949

D ANIEL A VILA , on behalf of himself and all other persons similarly situated
, Plaintiff

- Appellant
,

v.

C ITI M ORTGAGE , I NCORPORATED , Defendant

- Appellee

.

____________________ Appeal from the United States District Court for the Northern District of Illinois
, Eastern Division. No. 13 C 3566

— Ronald A. Guzmán
, Judge

.

____________________
A RGUED S EPTEMBER 29, 2014

— D ECIDED S EPTEMBER 4, 2015

____________________

Before E ASTERBROOK , W ILLIAMS , and S YKES , Circuit Judges

. S YKES , Circuit Judge

. Daniel Avila alleg e s that CitiMor tgage , Inc., violated a fiduciary duty and breached its mor tgage agreement with him by using the payout from his homeowner’s insurance policy to pay down his loan rather than repair his damaged ho use

. The district court dismissed Avila’s suit

— a proposed class action

— for failure to state a2 No. 14

- 1949

claim
, reasoni ng that (1) his a llegations do not support a fiduciary duty on CitiMortgage ’s part ; and (2) Avila was barred from pursuing his contract claim because he had materially defaulted on his own contractual obligations by missing several mortgage payments prior to CitiM ortgage’s purported breach.

We a gree with the district court on the first point: Avila ’s allegations of a fiduciary relationship are inadequate as a matter of law

. But his claim that the mortgage agreement remained enforceable after his missed payments is plausible in light of the agreement’s structure and the remedies it prescribe s in the event of default

. The breach

- of

- contract claim should not have been dismissed

.

I. Background

Avila bought his Chicago home in 2005 with a $100,500 mortgage loan from CitiMortgage

. Five years later, a serious fire made the house uninhabitable. Avila filed a claim with his homeowner’s insurance carrier , which paid out just over $150,000. Pursuant to the terms of the mortgage agreement
, CitiMortgage took control of the in surance proceeds. Avila selected a contractor, and CitiMortgage paid $50,000 of the
insurance money to get the restoration underway

. CitiMor tgage later inspected the work and found that it was of poor quality and needed to be redone, but by that time Avila had missed several mortgage payments. CitiMortgage then applied the remaining $100,000 from the insurance payout
to ward Avila’s outstanding mortgage loan. Avila’s home was never repaired

.No. 14

- 1949 3

The parties’ respective obligations regarding homeow ner’s insuranc e are spelled out in section 5 of the mortgage agreement

. 1 Avila was required to obtain a home owner’s policy that include d a standard mort gage clause and name d CitiMortgage as a loss payee

. 2 CitiMortgage had the right to disapprove Avila’s choice of car rier, take possession of the insurance documents
, and demand proof that Avila was paying the premiums

. Section 5 also addressed the parties’ obligations in the event that damage to the property resulted in an insurance claim:

U nless Lender and Borrower ot herwise agree in writing, any insurance proceeds ... shall be applied to restoration or repair of the Property, if the restoration or repair is economically fe asible and Lender’s security is not lessened. During such repair and restoration period, Lender sha ll have the right to hold such insu rance proceeds until Lender has had an oppo rtunity to inspect such Property to ensure that the work has been completed to Lender’s sati sfaction

... . ... Lender shall not be required to pay Borrower any interest or earnings o n such

1 The mortgage agreement was based on the Fannie Mae/Freddie Mac Uniform Instrument for single

- family homes in Illinois.

2 As we discuss in more detail later, “the ‘standard’ mortgage clause

... forms a separate and distinct contract between the insurer and the mortgagee, the effect of which is to shield the mortgagee from being denied coverage based upon the acts or omissions of the insured or the insured’s noncompliance with the terms of the policy.” Old Second Nat ’l Bank v. Ind

. Ins. Co. , 29 N.E.3d 1168, 1 175 (Ill App. Ct. 2015).4 No. 14

- 1949

proceeds.

... I f the restoration or repair is not ec onomically feasible or Lender’s security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due , with excess, if any, paid to Borrower

. (Emphasi s added.) Section 5 also provided that CitiMor tgage could use the insurance proceeds to pay down the loan on the occurrence of any of three additional c onditions : if the borrower abandoned the property
, ignored notice concer ning the i nsurance carrier ’s offer to settle a claim
, or if CitiMortgage foreclosed on the property.

As we’ve noted, CitiMortgage used the insurance pr oceeds to pay down the loan rather than repair the house, but it never claimed that restoration was economically i n feasible or would reduce its security interest. Nor had any of the three special conditions described above occurred. Avila sued CitiMortgage in Cook County Circuit Court alleg ing that its actions breached a fiduciary duty and the mortgage contract

. He sought to represent a class of all defaulting CitiMortgage borrowers whose homeowner’s
insurance proceeds had been applied to their mortgage loans rather than home repairs. CitiMortgage removed the case to federal court

. 3

3 Federal jurisdiction arose under the Class Action Fairness Act,
28 U.S.C. § 1332(d)
, based on minimal diversity. A fter an Illinois

- based codefendant was dropped, the parties became completely diverse, so jurisdiction was also pro per under 28 U.S.C. § 1332(a)(1).No. 14

- 1949 5

CitiMortgage moved to dismiss for fail ure to state a claim. See F ED

. R. C IV . P. 12(b)(6). The district court granted the motion, concluding that CitiMortgage owed no fiduci ary duty and Avila was precluded from bringing a breach

- of

contract claim be cause his default on his payment oblig ations preceded CitiMortgage ’s alleged breach

. 4 The d ismiss al order was without prejudice
, and Avila twice tried to amend his com plaint

. The later iterations of the complaint were also dismissed

— the last one with prejudice

. This appeal fo llowed.

II. Discu ssion

We review de novo the judge ’s order dismissing Avila’s complaint under Rule 12(b)(6) for failure to state a claim

. Carmody v. Bd. of Trs

. of the Univ. of Ill. , 747 F.3d 470, 471 (7th Cir. 2014). To survive a motion to dismiss, a complaint must contain sufficient fact ual allegations to state a claim for relief that is legally sound and plausible on its face

. Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) ( citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007))

. Avila brought state

- law claims fo r breach of fiduciary duty and breach of contract

. Ill inoi s law controls

.

A . Fiduciary Duty

Avila alleges th at CitiMortgage ’s use of his homeowner’s insurance proceeds to pay down his mortgage loan was a

4 Avila’s initial complaint also alleged claims for conversion and negl igence. These claims too were dismissed, and Avila does not challenge this aspect of the judge’s ruling.6 No. 14

- 1949

breach of its duty as a fiduciary

. “[I]n order to state a claim for breach of fiduciary duty, [a complaint] must

... allege [] that a fiduciary duty exists, that the fiduciary duty was breached, and that such breach proximately caused the injury of which the plaintiff complains. ” Neade v. Port es , 739 N.E.2d 496, 502 (Ill. 2000). The judge concluded that Avila’s complaint failed to allege facts sufficient to suppor t the existence of a ny fiduciary duty. We agree. “A fiduciary relationship exists when there is a special confidence reposed in one w ho, in equity and good co nscience, is bound to act in good faith and with due regard to the interest of the one reposing the confidence.” Hensler v. Busey Bank , 596 N.E.2d 1269, 12 74 (Ill. App. Ct. 1992 ). Some fiduciary relationships exist as a matter of l aw ( e.g. , the attorney

- client relationship ) , but t he mortgagor

- mortgagee relationship is not one of them. 5 See Teachers Ins. & Annuity

5 Where the alleged fiduciary relationship does not exist as a matter of law, Illinois requires that the facts from which the fiduciary relationship arises be “pleaded and proved by clear and convincing evidence.” Hensler v. Busey Bank , 596 N.E.2d 1269, 12 7 5 (Ill. App. Ct. 1992) . But federal pleading standards apply when considering a motion to dismiss a complaint that rests on diversity jurisdiction. See Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc. , 536 F.3d 663, 670

– 72 (7th Cir. 2008) (discussing the contemporary framework for determining whether a federal procedural rule applies); Caraluzzi v. Prudential Sec., Inc. , 824 F. Supp. 1206, 1213 (N.D. Ill. 1993) (holding that federal pleading standards control in a breach

- of

- fiduciary

- duty action brought under Illinois law); 5 C HARLES A LAN W RIGHT & A RTHUR R. M ILLER , F ED

. P RAC

. & P ROC

. C IV . § 1204 (3d ed. 2004) (“[The] suggesti[on] that state pleading tests must be followed insofar as the manner or the pa rticularity of pleading in a federal court

... [is] erroneous

... .”). To survive CitiMor tgage’s motion to dismiss, Avila only needed to plead facts that plausibly stated a claim for relief arising out of CitiMortgage’s violation of a fiduciary duty.No. 14

- 1949 7

Ass’n of Am. v. La Salle Nat’l Bank , 691 N.E.2d 881, 888 (Ill App. Ct. 1998). Avila coun ters that the fiduciary relationship at issue in this case “ is limited to the use of the insurance proceeds” and arose because “the insurance proceeds [were] placed in the hands of [CitiMortgage]
, ” thus “c reat [ing] an

escrow ” under Illinois law.
An escrow is “[a] le gal document or property delivered by a promisor to a third party to be held by the third party for a given amount of time or until the occurrence of a condition, at which time the third party is to hand over the document or property to the promisee.” B LAC K ’ S L AW D ICTIONARY (10th ed. 2014); see also Wiczer v. Wojciak
, 30 N.E.3d 670, 679 (Ill. App. Ct. 2015)

. In effect, an escrow reduces the degree of trust necessary to complete a deal by reducing the risk that one party won’t turn over money or documents as promised. Under Illinois law “[a]n escrow agent has a fiduciary duty to the party making the deposit and the party for whose benefit the deposit is made. As a result, an escrow agent must act impartially toward all parties.” 6 Wells Fargo Bank Minn., N.A. v. Enviro B usiness, Inc.
, 22 N.E.3d 125, 136 (Ill. App. Ct. 2014) (citation omitted)

. More specifically , a n escrow agent ’s “duty [is] to act only in accordance with the

... escrow instructions.” Int’l Capital Corp. v. Moyer , 806 N.E.2d 1166, 1170 (Ill. App. C t. 2004). I f under the mortgage agreement CitiMortgage was an escrow

6 Illinoi s courts have described escrow agents both as “special agents” and “trustees,” see Estate of Reinhold v. Mansfield , 412 N.E.2d 1146, 1149 (Ill. App. Ct. 1980) , but in either case the agent assumes fiduciary duties,

s ee Albrecht v. Brais , 754 N.E.2d 396, 39 9 (Ill. App. Ct. 2001) (distinguis hing an escrow agent from a trustee)

.8 No. 14

- 1949

agent , then Avila has adequately alleged the existence of a fiduciary duty. CitiMortgage objects that Avila ’s escrow theory comes too late

— he never used the word “escrow” in any of his three complaints and did not argue below that a fiduciary relationship between the parties arose based on an escrow

. There’s no question that Avila c ould have helpfull y clarified his case if he had characterized the alleged fiduciary rel ationship as an escrow from the beginning. That said, plai ntiffs are not required to plead specific legal theories. King v. Kramer , 763 F.3d 635, 642 (7th Cir. 2014). Avila’s c omplaint alleged that a fiduciary duty existed because

“ Citi [ Mortgage ] had the ri ght to retain exclusive control over these insurance proceeds” and he “had no right to object to or interfere with Citi [ Mortgage ] ’s determination regarding the satisfactory completion of the [repair] work.” These allegations gave CitiMortgage and the court adequate notice of the scope of, and basis for, the alleged fiduciary relatio nship. Cf. Vincent v. City Colleges of Chi. , 485 F.3d 919, 923 (7th Cir. 2007) (holding that Rule 8(a)(2) of the Federal Rule s of Civil Procedure “calls for a short and plain sta tement; the plaintiff pleads claims, not facts or legal theories”).

It’s true that Avila did not utter a word about an “escrow theory ” in opposition to any of CitiMortgage’s Rule 12(b)(6)
motions in the district court. Issues raised for the first time

on a ppeal are generally treated as waived. County of McHenry v. Ins. Co. of the W

. , 438 F.3d 813, 820 (7th Cir. 2006) (explaining that new factual allegations may be considered on appeal if consistent with the complaint
, but new issues raised for the first time on appeal ordinarily will not beNo. 14

- 1949 9

addressed). Even if we set the w aiver aside
, however, Avila’s escrow theory comes up short

.

“ T he dominant party must accept the responsibility, accept the trust of the other party before a court can find a fiduciary relationship

. ” Pommier v. Peoples Bank Marycrest , 967 F.2d 1115, 1119 (7th Cir. 1992 ) (emphas e s added ) ; see also DeWitt C n ty. Pub. Bldg. Comm’n v. County of DeWitt , 469 N.E.2d 689, 701 (Ill. App. Ct. 1984) (“Those who have in the law’s view been strangers remain such, unless both consent by word or deed to an alteration of that status.” (quoting S. Trust Co. v. Lucas , 245 F. 286, 288 (8th Cir. 1917) ) ). Section 5 of the mor tgage agreement does not explicitly create an escrow, and nothing in Avila’s complaint supports an inference that CitiMortgage affirmatively accepted the role of es crow agent

. Still, t he existence of a n escrow, like any fiduciary relation ship, can “be determined from the relations of the parties and their respect ive rights and duties.” Albrecht v. Brais , 754 N.E.2d 396, 399 (Ill. App. Ct. 2001). Avila argues that section 5 implicitly creates an escrow. In other words, h e argues that the implied escrow is so self

- evident that CitiMort gage accepted the duties of esc row agent merely by entering into the mortgage agreement. This is essentially a question of contract interpretation

. T he function of an escrow agent is to serve as intermed iary, faithfully delivering the escrow ed property in strict conformity with the ins tructions issued by the parties to the escrow agreement

. See Wiczer , 30 N.E.3d at 679 ; Int’l Capital Corp. , 806 N.E.2d at 1170. Avila says that CitiMortgage i s the intermediary between his insurance carrier and himself. But that’s not an accurate characterization of Cit i Mortgage’s role. The insurance carrier was not party to the mortgage agre e-10 No. 14

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ment and thus could not be the grantor in any escrow crea ted by section 5. T he insurance carrier ’s involvement was completed as soo n as it issued the check for the policy proceeds ; it gave no instructions about how CitiMortgage should use the money, and without instructions there can be

no escrow. 7
Instead, section 5 is an agreement between Avila and CitiMortgage alone

. And as a term of the contract, it exists almost exclusively for CitiMortgage’s benefit

. W ithout
section 5, Avila could use the insurance proceeds to repair his house or pay down his loan at his discretion

. T he mor tgage agreement shifts that d iscretion to CitiMortgage t o ensure that repairs are “economically feasible,” that its “security is not lessened
, ” and that it will have “an oppo rtunity to inspect such Property to ensure the work has been completed to [ its ] satisfaction.” 8 Avila suggests that the se are the escrow instructions, but it ’s not consistent with a typical

escrow ar rangement to give an escrow agent authority to make self

- interested and discretionary decisions about when and where to disburse the escrow ed funds. C ontract law imposes an implied duty of good faith on parties empo wered by the contract to e xercis e discretion
, s ee RBS Citizens,

7 Avila’s homeowner’s insurance policy is not in the record, but any conditions it might impose on the use of the insurance proceeds are independent of the obligations imposed on CitiM ortgage in section 5 of the mortgage agreement

.

8 The fact that Avila will also benefit from the insurance funds in the sense that they will ultimately be used either to repair his house or pay down his mortgage loan does not alter the conclusion that the purpose of the arrangement in s ection 5 is to enable CitiMortgage to protect its own interests, not Avila’s.No. 14

- 1949 11

Nat’l Ass’n v. RTG

- Oak Lawn LLC , 943 N.E.2d 198, 206

– 07 (Ill. App. Ct. 2011), but that duty doesn ’t create a fiduciary relationship . Simply put, nothing in section 5 indic ate s that CitiMortgage assumed a duty to act for Avila’s benefit in place of its own. See R ESTATEMENT (T HIRD ) OF T RUSTS § 2 cmt.b (2003) ( “Despite the differences in the legal circu mstances and responsibilities of various fiduciaries, one characteristic is common to all: a person in a fiduciary relationship to another is under a duty to act for the benefit of the other as to matters within the scope of the relatio nship.” ). There’s another important way in which CitiMortgage differs from a typical escrow agent : W hile “[a]n escrow agent ... is not vested with title to the property,” Albrecht
, 754 N.E.2d at 399
, CitiMortgage did have title to the insu rance proceeds. CitiMortgage was a loss payee under the
insurance policy , as wel l as the beneficiary of the insurance contract’s standard mortgage clause. 9 See G RANT S. N ELSON & D ALE A. W HITMAN , R EAL E STATE F INANCE L AW 173 ( 5 th ed. 2007) (“The effect of the [standard mortgage] provision is to insure the mortgagee’s interest, as fully and to the same extent as if the mortgagee had taken out a separate policy directly from the insurer

... .”) ; Old Second Nat’l Bank v. Ind. Ins. Co. , 29 N.E.3d 1168, 1175 (Ill. App. Ct. 2015)

. In other words, CitiMortgage was not merely a custodian of Avila’ s money ; the insurance proceeds were issued to CitiMortgage directly, and it had a property interest in them. W hile it’s

9 Avila emphasizes that s ection 5 says that CitiMortgage will “hold” the insurance proceeds

. T hat single use of th e term does not alone change the formal legal relationships established by or mandated in the mor tgage agreement.12 No. 14

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common for escrow agents to be compensated out of the funds in the escrow, it’s not co nsistent with an escrow for the agent to have title to those funds while they remain in e scrow

. Th is conclusion is bolstered by the fact that CitiMortgage expressly a gree d to the creation of escrows (and to be an

escrow agent ) elsewhere in the mortgage agreement. S pecif ically, section 3 allows for the use of escrows to pay for property taxes, lease payments, insurance premiums, and community association dues

. T he “Definitions” section of the mortgage contract defines “Escrow Items” solely as “those items that are described in [s] ection 3.” Comparing se ction s 3 and 5 is telling. Section 3 allows third

- party banks to collect money from Avila and disburse
it to the relevant tax authorities, insurance carrier s , and homeowner’s association s in accord ance with the instru ctions agreed to by Avila and CitiMortgage . The se “instru ction s” are clear and the payment amounts are fixed by law

or con tract. Distribution of the escrow ed funds is not subject

to the escrow agent ’s discretion
, nor is the agent entitled to determine whether a given use of the funds f urthers its own economic interest s

. Finally, the intermediary bank does not have an independent property interest in the funds

— it’s just a custodian until the money can be paid out in accordance with the escrow instructions. Section 3 expressly authorizes CitiMortgage to serve as the escrow agent , assuming it is “ an institution whose deposits are insured by a federal agency

. ” B ut the important point is that its function is simply to possess the funds and disburse them in accordance with the escrow instructi ons. T here can be no conflict of interest between Avila andNo. 14

- 1949 13

CitiMortgage with respect to the section 3 escrows because both parties share a common interest in ensuring that the taxes, premiums, and fees are paid on time. Also, s ection 3 (unlike section 5) requires CitiMortgage , if it ’ s serving as

escrow agent , to provide an annual accounting of the e scrowed funds. Cf. Midwest Decks, Inc. v. Butler & Baretz Acquisitions, Inc. , 649 N.E.2d 511, 517 ( Ill. App. Ct. 1995) ( noting, in the course of finding that no escrow existed, that

“ t he purchase agreement in the case at bar did not call for setting up an escrow account or for segregating the funds ”). In sum, while the parties clearly intended for section 5 to govern their interlocking contractual obligations wi th r espect to Avila’s homeowner’s insurance policy , Avila has not plausibly alleged tha t CitiMortgage assumed any additional,

extra

- contractual duties of a fiduciary nature. See Zelickman v. Bell Fed. Sav. & Loan Ass’n , 301 N.E.2d 47, 51 (Ill. App. Ct.
197 3) (holding that a fund from which the lender paid insurance premiums on behalf of the homeowner was not a trust but rather “an additional contractual security device for the protection of defendant’s rights as creditor, specifically agreed to in the contr act between the parties”). The claim for breach of a fiduciary duty was properly dismissed

.

B . Breach of Contract

Avila’s breach

- of

- contract claim is based on the following language from section 5: “Unless Lender and Borrower otherwise agree in writing, any insurance proceeds ... shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender’s security interest is not lessened.” (Emphasis added.) Because14 No. 14

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CitiMortgage n ever indicated that repairing the house was economically infeasible or would harm its security interest
, Avila argues that it breached the mortgage agreement

. He also points out that the other three conditions listed in
secti on 5 that would permit CitiMortgage to use the insu rance proceeds to pay down the loan

— abandonment, the failure to respond to an insurance settlement , and forecl osure

— did not oc cur

. The judge concluded that Avila could not prevail on his breach

- of

- contract claim even assuming CitiMortgage had, in fact, breached section 5. T he elements of a claim for breach of

contract a re (1) the existence of a valid and enforceable

contract ; (2) substantial performance by the plaintiff ; (3) breach of contract by the defendan t; and (4) resultant injury to the plaintiff

. W.W. Vincent & Co. v. First Colony Life Ins. Co. , 814 N.E.2d 960, 967 (Ill. App. Ct. 2004). The judge reasoned that s ince Avila had defaulted on his mortgage payments prior to CitiMortgage’s alleged mis use of the insurance proceeds, he fell short on t he “substantial perfo rmance” element of the claim

. See R ESTATEMENT (S ECOND ) OF C ONTRACTS § 237 (1981) (“[I] t is a condition of each party ’ s remaining duties to render performances to be exchanged under an ex change of promises that there be no uncured material failure by the other party to render any such pe rformance due at an earlier time. ”). Avila responds that the parties intended that section 5 would remain enforceable even after a default by the borrower

. Section 22 of the mortgage agreement describes CitiMortgage ’s remedies in the event of a default by the homeowner. Specifically, the lender is entitled to accelerate a loan and initiate judicial foreclosure proceedings, but onlyNo. 14

- 1949 15

after giving the homeowner notice of the alleged default and providing 30 days to cure it. (Acceleration in turn triggers the borrower’s right to reinstate the mortgage agreement if certain conditions are met. ) Avila argues that because s e ction 22 establishes a specifi c process for dealing with a de fault, the homeowner’s first default would not make the mortgage agreement thereafter wholly unenforceable. And while CitiMortgage could have accelerated Avila’s loan in response to his default, applying the insurance proceed s to pay down his loan balance was not a remedy for missed payments

. That’s a reasonable reading of the mortgage contract. Se ction 5 appears to envision the survival of its terms after a default. As we’ve explained , th at section gives CitiMortgage the righ t to apply insurance proceeds toward the outstan ding loan balance under certain specified conditions, inclu ding the homeowner ’s abandon ment of the property or foreclosure by CitiMortgage

. A bandonment is a default per

se under certain circumstances ( under s ection 6 of the agreement ) , and foreclosure necessarily fol low s a default.
T h ese provision s of section 5 would be superfluous if any default immediately gave CitiMortgage the right to apply an insurance payout toward the mortgage loan. See Cent. Ill. Light Co. v. Home Ins. Co. , 821 N.E.2d 206, 213 (Ill. 2004) (“[A] contract[] is to be construed as a whole, giving effect to every provision, if possible, because it must be assumed that every provision was intended to serve a purpose.”).
Indeed, CitiMortgage c oncedes that the mortgage agre ement does not become a nullity at the moment of default, though it apparently thinks that the contract becomes entir ely unenforceable (from the breaching party’s perspective) from16 No. 14

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that point forward. But CitiMort gage’s positi on would give it

a carte blanche of indeterminate duration to hold Avila to his contractual obligations while its own performance is subject to nothing but its own whims.

C ontracting parties are free to negotiate in advance how breaches should be handled

. F or example, a nondefaulting part y cannot recover in excess of the amount it agreed to in a liquidated damages clause, regardless of its actual damages. See Berggren v. Hill , 928 N.E.2d 1225, 1229 (Ill

. App. Ct. 2010). A contrary holding would raise equit able concerns similar to those addressed by the election

- of

- remedies principle , which holds that
[i] f a party to a contract breaks it, the other pa rty can abandon the contract (unless the breach is very minor) and sue for damages, or it can continue with t he contract and sue fo r dama ges . But if it makes the latter election, it is bound to the obligations that the contract im poses on it.

Emerald Inv s

. Ltd. P’ship v. Allmerica Fin. Life Ins. & Annuity Co. , 516 F.3d 612, 618 (7th Cir. 2008) (citations omitted); see also Omni Partners v. Down , 614 N.E.2d 1342
, 1346 (Ill. App. Ct. 1993) (“[I]f the injured party chooses to continue perfo rmance, he has doubtless lost his right to stop performance.”);
14 S AMUEL W ILLISTON & R ICHARD A. L ORD , W ILLISTON ON C ONTRACTS § 43:15 (4th ed. 2014) (“[B]y outward manifest ations indicating that the defective performance has been accepted, the obligor has sent the unmistakable signal

— by conduct, rather than by an express promise

— that it still considers the contract to be binding.”).No. 14

- 1949 17

In light of the bargained

- for remedies for default co ntained in section 22 of the mortgage agreement , and the presumption against superfluity as applied to section 5, Avila has stated a facially plausible claim that the parties d id not intend th at his missed payments preclude him from enforc ing section 5 of the a greement. Though CitiMortgage could have accelerated Avila’s loan in response to his missed mortgage payments, it did not do so. CitiMortgage cites Hukic v. Aurora Loan Se rvices , 588 F.3d 420 (7th Cir. 2009), for the proposition that a borrower ’s breach makes him powerless to enforce a mortgage agre ement

. That’s a significant overreading of the opinion. Hukic ’s mortgage agreement required him to provide his lender with proo f that he was paying his property taxes and insu rance premiums . I f he didn’t, the lender was entitled to pay the taxes and insurance itself and then add the costs to the monthly mortgage payment. Id . at 433. Hukic pa id his taxes and premiums but ignored the lender’s repeated requests for proof of payment and then sued when the lender paid the bills on his behalf

. Id

. We affirmed the dismissal of Huki c ’s breach

- of

- contract claim. Id. As we explained in a later case , “Hukic’s failure to comply with his cont ractual obligations was material and absolved the servicers from liability b ecause it directly caused the servicers’ actions that were the basis of his own breach of contract claims.” Catalan v. GMAC Mortg. Corp. , 629 F.3d 676, 692 (7th Cir. 2011).

Here, A vila ’s claim is that CitiMortgage ’s use of the i nsurance proceeds to reduce his loan was not a contractually permitted response to his default . I n Hukic the lender’s response to the borrower’s default was expressly permitted.
T he two cases are not analog ou s.18 No. 14

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CitiMortgage also claims that Avila’s complaint is defe ctive unless it assert s his compliance with each and every affirmative duty imposed on him by the mortgage agre ement. We disagree, f or essentially the same reasons di scussed above ; Avila has pleaded a facially plausible claim that the mortgage agreement survive d his default

. T he possibility that Avila has other unknown (and uncured ) defaults does not necessari ly defeat his claim

. We do not , of course, express any view on the ultimate merits of Avila’s claim. CitiMortgage may have contract defenses that eventually prove decisive . Perhaps Avila ’s suit should be barred because he bre ached the contract by filing suit without provid ing the lender with notice and a “reaso nable period” in which to “ta ke corrective action
, ” as required by section 20

. Perhaps CitiMortgage can muster evidence that the parties did not intend for section 22 to be conclusive

as to CitiMortgage’s remedies in the face of a de fault and in fact wanted the breaching party to be p recluded from enfor cing the mortgage agreement. Or perhaps CitiMortgage can
revive its argument

— rejected in passing by the district

court

— that Avila suffered no economic damages because the insurance proceeds reduce d his loan balance

. Non e of these potential defens es have been litigated, and they were not part of the judge ’s order dismissing the case. CitiMortgage is free to raise them on remand. For the foregoing reasons, we A FFIRM the dismissal of the claim for breach of fiduciary duty, R EVERSE the dismissal of the breach

- of

- contract claim, and R EMAND for further pr oceedings consistent with this opinion.